In a shock move that may lead to panic in the markets, India, the world’s second-biggest wheat producer, has banned wheat exports with immediate effect. The ban excludes exports which already have a letter of credit opened against them but includes forward sales, leaving exporters no choice but to declare force majeure on later shipments. The directive gives the government some wiggle room by hinting government-to-government sales may still be allowed. Meanwhile, the early arrival of monsoon rains could provide farmers with some relief.
India exported a record seven mln mt in fiscal 2021-22 and a record 1.4 mln mt in April, the first month of the 2022-23 fiscal year. Traders have already contracted to export 4.5 mln in 2022-23, and the country had earlier targeted to export a record ten mln mt in 2022-23.
In their latest WASDE report, the USDA had pencilled in India to export 8.5 mln mt. The agency forecasts 2022-23 global wheat production at 774.8 mln mt, the first decline since the 2018-19 season, and stocks at 267 mln mt, the lowest level in six years. It expects the US winter wheat shortfall could be more severe than previously believed and that the country’s wheat exports could be the lowest since 1971/72
The USDA puts Russian production at 80 mln mt, up from 75 mln mt last year, with exports at 39 mln mt, up from 33 million mt. It predicts (guesses) Ukrainian production at 20.5 million mt, 11.5 million lower than in 2021/22 and puts exports at 10 million mt, down from 19 million. Many traders believe that even ten mln mt of exports would prove too high.
The Chinese government is cracking down on the illegal destruction of wheat crops for construction sites and silage for animal feed. An analyst told Bloomberg that given the poor conditions of the crop, it isn’t surprising that farmers are cutting the wheat for hay as it may offer a better return than grain.
A drought threatens the wheat harvest in France, where the first quarter of this year was among the ten driest winter periods on record for some regions. The one bright spot for wheat is in the Canadian Prairies, where wet conditions are delaying crop planting of corn and soybean and may increase wheat acreage.
The European Investment Bank (EIB) has said that Ukraine has €8bn worth of wheat from last year’s harvest that they can’t export. An EIB spokesman said, “They are sowing like crazy right now, and they will expect probably a good harvest, maybe 70 per cent of last year’s harvest, in a couple of months – and then what to do with it?”
The European Bank for Reconstruction and Development (EBRD) is considering financial support for Ukraine’s transport and logistics companies to help them maintain their exports. Ukraine last week formally closed its four Black Sea and Azov Sea ports, which Russian forces have captured, leaving land routes through neighbouring countries as its only export option.
Ukraine’s president has called for the end of the naval blockade of the country’s ports to allow wheat shipments.
The EU is exploring ways of getting around Russia’s Black Sea blockade by taking the overland route via EU roads and railways. Canada has also offered to help, but transporting Ukrainian grain by land into Europe can be difficult. The port of Constanta in Rumania is doing its bit, but in the meantime, the Russians are stealing Ukrainian grain and exporting it as their own.
Malaysian palm oil exports surged 40 per cent in the first ten days of May compared with the same period during the previous month after Indonesia imposed an export ban. The ban gives Malaysian palm oil an edge, and the government is considering cutting its export tax on palm oil. It also plans to slow the implementation of its biodiesel mandate.
Despite the export ban, Indonesian consumers complain that their domestic vegoil prices haven’t fallen. Indonesian customs officials have impounded eight shipping containers of cooking oil at Tanjung Perak port bound for East Timor. Those found guilty of breaching the cooking oil export ban could face five years of prison and a fine of up to 5 billion rupiahs ($341,997).
The FT writes that food nationalism is fuelling global inflation and hunger amid warnings of social unrest in Africa, where processed food manufacturers are substituting wheat with manioc flour and sorghum. The Guardian suggests cassava could be the best alternative.
Cotton prices also headed higher on world markets on fears of an Indian export ban and dry weather in the US.
US egg prices rocketed by 23 per cent between March and April as the country’s worst-ever outbreak of bird flu killed more than 37 million chickens and turkeys.
UK poultry producers warn that chicken could soon cost as much as beef due to the rising price of feed, and UK consumers are suffering. The Food Foundation reports almost 10 million Britons cut back on food or missed meals last month. (Ecowatch has published a timely guide on foraging food from the wild rather than buying it in a supermarket.)
There is some optimistic news from Australia, where researchers have identified a genetic driver in wheat that could increase protein content by up to 25 per cent.
Finally, the World Bank has published a book entitled Commodity Markets – Evolutions, Challenges & Policies. I haven’t read it yet, but you can download it here.
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